A question which gets asked a lot in Australia’s owner builder forums, is whether to get a builder to build the house to lockup, and then take over to complete the home as an owner builder. On the face of it, this is an appealing option. It doesn’t seem very common in practice though. Why is that?
What is lockup?
Lockup is not that precisely defined, but it means that you can lock a door and the perimeter of the building is complete. So, like, you have walls, windows, external doors, and a roof.
Why is ‘builder to lockup’ appealing?
Project managing the construction of a house is a very serious undertaking. Builders regularly go bust doing it, or build homes with significant problems. If you’re thinking of owner building, this can be daunting. Getting a builder to construct the shell of the building, so that you can manage and or do the internal fitout yourself, might seem like a good way of accessing some of the benefits of owner building, while reducing the challenges and risks involved.
I felt the same way when I set out on my owner builder journey. This option was appealing to me, and I looked into it.
A way to save money?
A key benefit of owner building, of course, is the potential to save money, I wrote a whole blog post about how much you can save by owner building. Bear in mind though, that if you reduce the ‘owner builder’ proportion of the build, you are also likely to reduce your potential savings. Let’s say you were aiming to save 20% on your build. If your builder is now going to do 50% of the build, you are left with aiming to save 20% of the other 50%, or 10% of the total build.
Still, 10% of the cost of building a house is a lot of money, so you would think that this might be quite a popular option for people who want to get involved in owner building, but don’t feel confident enough to bite off the whole thing themselves.
An ‘owner builder’ hybrid
Using a builder to lockup stage is essentially a hybrid of your two more obvious options – using a builder or owner building.
In Australia for building works over a certain value (here in WA it’s $20,000), you have to get a Building Permit from your local council. To get a Building Permit, you need a building license. A builder, obviously, has a building license. But, most states allow you to obtain your own building license (an Owner Builder Permit) to construct your own home. They usually restrict you to doing this every few years, so you don’t become a builder in disguise. And they require you to do an owner builder course to ensure you understand the legal framework and responsibilities that come with being a (temporary) licensed builder.
So the ‘builder to lockup’ hybrid approach is appealing. And yet, it doesn’t seem to be happening very much in practice. Why would that be?
Clarity of responsibilities
One challenge is to ensure clarity of responsibilities. Getting a clear contract together about who is going to do what. What tasks and costs are included or not included in the builder’s works. If you have a great relationship already with a builder you trust, this may not seem too daunting.
The other place where this is likely to rear its head though, is if there’s a problem. It’s a classic feature of any building project that when there’s a problem, everyone points the finger at someone else. The plumber says the sparkie did it when they chased out the walls, the sparkie says it’s the brickie’s fault, the brickie shrugs and says it’s nothing to do with him. When the project is being run by a builder, it’s their job to knock all these heads together to find a solution and work out who bears the cost.
But, let’s say your house develops a significant problem a year after it’s complete, if the builder built it for you, they’re liable. If you’ve built it yourself, you’re liable, or it’s up to you to make a claim against tradies or suppliers if relevant. But in the hybrid model, there’s an extra layer of grey area, where you may feel crystal clear that it was the builder’s work that caused the problem, but they may shrug and tell you that in their expert opinion it’s because of something you did as part of your share of the project.
For this and other reasons, you may have difficulty recruiting a builder to do your ‘builder to lockup’ work. Building a house comes with a lot of responsibility and liability, and a builder may not want to get involved in having long-term responsibility for a project where they only had control over half the work.
Here are some things I found that owner builders have said about all this:
- “We have contacted 12 builders about building to lock up only and not many of them will even listen any further let alone take it on. Good luck.”
- “A massive black area … Grey area comes about arguing over whether something you or they did affected the other. Eg. They could have framed up for an empty ceiling and you might add flooring into roof space to create an attic. If the ceiling then sags who is responsible? Gets messy.”
- “If plumber has roughed in you MUST maintain the plumber otherwise you will find it extremely hard to get a plumber to certify the works if they didnt do rough in.”
- “Make sure you get [the builder] to sign off on any work to date that needs to comply with regulations/relevant codes.”
- “If tradies don’t stay on you will need to find new tradies who will be happy to take over some else’s work which most will not do or if they do will charge extra to have to test/check what has already been done.”
Warranty insurance
Warranty insurance is a common solution to this kind of problem. But, finding an insurer willing to give you an owner builder warranty insurance for only your half of the works, may not be achievable.
Owner builder insurance
You may also have problems with owner builder insurance for your half of the build itself, to insure you against things like theft and accidents.
- “Our home is currently at lock up and Builder has gone into liquidation. We are researching completing it as OB. We have been advised because it has started being built, insurance is $15-20k and excess of $50k!”
- “We’ve done it, not because of choice. Liquidated builder. Our contract works and public liability insurance was about 10k, not many insurers would insure us mid build. We nominated ourselves as owner builder to get the insurance, they wouldn’t insure with no nominated builder.”
Permits
Another question is what permit(s) will be used for the work. Is the builder going to get the Building Permit, and you’ll be a subcontractor, and the warranty for the build will stay with the builder? Or are you going to get the Building Permit using an Owner Builder Permit, and hire the builder as a subcontractor, the warranty for the building will stay with you, and you’ll need to supervise the quality of the builder’s work? Or will your council be willing to issue two Building Permits, one to the builder for the first phase of the work and one to yourself for the second half of the work? Will there be extra cost in that?
- “In Vic… we build to lock up under one permit and builder retains liability/warranty for those works . Then as an OB you need to take out own permit to finish works to completion. And would need to have your own insurances to get that permit.”
- Another indication that things may be more feasible in Victoria comes in this comment: “Just get a a building permit to lockup, and then a second as an owner builder from lockup to final. Just sort it out with your building surveyor.” This sounds like quite a different process from WA, for example.
Finance
Will you be able to borrow to fund this kind of hybrid build? If you’ve got the funds yourself to pay the builder to lockup phase, maybe you can borrow as an owner builder to finish the rest? But owner builder finance seems pretty tough to get in any scenario at the moment, never mind a hybrid scenario with added complexity and risks.
- “We did this. Not by choice I might add haha our builder went under in Feb … we had our construction loan through CBA and they refused to pay out the remainder of our loan unless we went with registered builder. We were fortunate to have access to funds to complete it ourselves which is why we went the OB route.”
- “Very doable, our build went bust … As for the loan that had been a bit annoying, we have used our savings … Do talk to the bank before you go to far ours just flat out refused to give us another penny as owner builder.”
- “Never found a bank that would lend just to lockup so we’ve given up on that idea.”
How often do people do this?
Just because these challenges are there, it doesn’t mean they can’t be overcome. But, I’ve spent an hour looking through all the threads I could find on this, and my conclusion is that this is pretty uncommon, even though a lot of people ask about it. In that hour, I managed to find a handful of examples of people actually using this hybrid approach in real life.
- “We did exactly this! … It cost about 65% of the price of a full build. We have spent weekends and holidays finishing the inside – insulating, plastering, tiling, hanging doors, skirts and arcs etc.” This was in Victoria, and the more I looked into this, the more I got the impression that this might be more feasible in Victoria than elsewhere.
- “I did this in NSW on my last build. A builder got me to lockup and I took it from there. Builder did foundations, framing, roof, external cladding and installed windows and doors which I supplied.” He also mentions that his build was self-funded.
- “Almost finished my reno/extension doing this. 100% builders are willing to do this.”
Is this the right path for you?
So this might seem like a simpler option than straightforward owner building, but it may not be. In any scenario, your best next steps are research, research and more research. Putting in the hard graft to bring yourself to the point where you can make a really informed decision about the best path for your build. Quick calls about finance, permits and insurance may rapidly rule this option out immediately.
Everyone I’ve met who’s doing a great job of owner building their home is a real self-starter, doing a huge amount of hard work, and showing steady persistence in keeping on going. Building a house is very challenging and involves large sums of money. If you’re ready and willing, it can be enormously rewarding.
Image by Michal Jarmoluk from Pixabay